I don’t need to tell you it’s tough out there. We’re coming off one of the worst periods in history for the market with stocks down over 14% for the quarter and over 7% in September alone. Even hedge funds were rocked with their worst quarter in 15 years. Worse than looking at our statements, that it is just dreary. It seems nobody has anything positive to say about the future. Well, I’m going to go on record as saying that I believe the 4th quarter is going to be better than expected.
The continuation of QE Mini-Me and Ben Bernanke’s other stimulus programs should keep us out of a double dip recession. It won’t be gangbusters by any means, just more of what I have coined as a ‘slog through the mud’. Much of the economic data has been at the very least OK, mostly better than expected. This data coupled with the intense negative investor sentiment should bring a good Q4.
The key for the stock market will, of course, be earnings. Considering that we have had consistent positive earnings surprises and that earnings expectations have been lowered, stocks and bonds could be set up for no less than a relief rally. The action of the market over the last few days has been encouraging. On Tuesday, I posted a Critical Market Commentary on our blog – The Market Breaks Key Support – where I said we needed a quick reversal back above the breakdown level to show a shakeout was complete, or we would have another major leg down, and we got that recovery. Of course, we won’t know until we have some follow through, but it is a good sign.
The massive debt problems, coupled with a lack of spending in most of the developed world including the US, which is what Facing Goliath: How to Triumph in the Dangerous Market Ahead is all about, is not going away. Crises’ of confidence happen when you least expect them as massively over-indebted governments, banks, people or corporations can seem to be happily rolling along when lenders disappear and panic erupts. There’s a limit to how much the bond market lets you borrow, and that’s what shut down Greece, and if we’re not careful with our deficit, it will happen to us.
Investors must be tactical and avoid that buy-and-hold (hope) mentality most stock brokers and financial planners plant in your brain, which is nothing more than rearranging the deck chairs on the Titanic. They’re just being lazy. Plus, it’s hard to invest tactically and be equipped to make quick decisions unless you have a lot of experience. It’s the most dangerous market I have seen in my 27+ years in the business, but there are still plenty of places to make money out there without a lot of risk. I have been focusing on dividend and income opportunities, many yielding over 8-10% and I still feel that if you are not investing for income, you are just gambling.
And that’s where we can help… Our active hands-on approach to managing portfolios can help you manage risk and deliver returns. Call me for a free consultation today at (916) 925-8900.
Regards – Keith Springer